Canva set to be Australia’s ‘most successful tech company ever’
Paul Smith Technology editor
Sep 15, 2021 – 4.16pm
With its valuation storming higher by the second, Australian design software titan Canva has no plans to hop off the rocket ship any time soon, with an initial public offering that will leave it beholden to the whims of market jitters and sober analysis of profit numbers. However, the eight-year-old company has given the most details yet about the staggering growth it is achieving in the private realm, with its latest headline-grabbing funding announcement on Wednesday catapulting it to an astonishing $US40 billion ($55 billion) valuation.
Canva co-founders (from left) Cliff Obrecht, Melanie Perkins and Cameron Adams at their Surry Hills offices in 2015, when the wheels of rapid growth were already starting to turn. Nic Walker.
It’s valuation has been growing like crazy since it first revealed a $458 million figure after a funding round in September 2016, and just this year has exploded from $19.6 billion in April. On paper, Canva is worth more than locally listed luminaries such as Woolworths, Telstra, Goodman Group, Transurban and recently acquired tech sector peer Afterpay, it has more than 500,000 paying teams using its software globally and annualised revenue is already at $700 million. In an online press briefing hosted by founders Melanie Perkins, her husband Cliff Obrecht and Cameron Adams, the trio admitted they were still “learning on the fly” how to run the company, but were clear there is no plan to hurry to a listing.
Obrecht said the two key reasons for companies to go public were to raise money or for liquidity, neither of which were a problem for Canva. “We don’t have any plans to IPO on the immediate horizon ... We’re able to achieve both of those things in the private markets at the moment, which allows us to maniacally focus on growing the business,” he said.
“We want to focus all our time on growing the business and delivering as much value as we can to the community, and because we can achieve those goals of availability of capital and raising capital and liquidity, there’s no huge rush to go out and list.”
“There is no question in my mind that Canva will be the most successful tech company ever created out of Australia.”
— Daniel Petre, AirTree Ventures
In an era where Australian tech companies are starting to seriously break out of the confines of their remote geography, Canva stands in a class of its own in terms of growth. Like all good tech companies, it has a catchy backstory, which involved Perkins and Obrecht meeting at university in Perth and shifting a part-time gig advising other students on how to use design software, into a boutique business called Fusion Books, which let users design their own school yearbooks.
They met big name US investor Bill Tai at a conference in 2010. He was impressed enough with Perkins’ idea for Canva – an online software tool anyone can use – that he encouraged her to attend a networking event in the US.
In true Silicon Valley venture capital style, the event combined networking with the thrills of kitesurfing, meaning Perkins had to quickly learn how to ride the waves to get her foot in the door. The terror proved worthwhile once the cheques started rolling in.
Profitability less clear
Canva’s easy-to-use design software rapidly gained users around the world, taking on the likes of Adobe, which made much more complicated and expensive software to do similar things.
It added “teams” capabilities so employees within organisations could work together on projects, bought up stock photo libraries, provided the ability to make video content and has become a staple tool in schools, universities and companies around the world.
Having been formally founded in 2012 and launched in 2013, Canva has grown to employ 2000 staff, with most in Australia. Its products have more than 60 million monthly active users and is used across 190 countries in more than 100 languages.
It is less clear how profitable or otherwise the company is. Its last publicly filed numbers showed that in 2019 it made a $44 million loss, yet had $31 million positive cash flow. But such numbers do nothing to drown the enthusiasm of the investors who backed Canva early and have seen their stakes soar in value.
Blackbird Ventures partner Rick Baker and Square Peg Capital’s Paul Bassat were among the first investors to see promise in Canva, buying into the $1.6 million raise in March 2013. It also included Tai, along with Yahoo! chief financial officer Ken Goldman and Google Maps co-founder Lars Rasmussen.
“Incredibly, Canva’s growth has actually accelerated as its size has skyrocketed.” — Rich Baker, Blackbird Ventures partner
Fellow Aussie VC fund AirTree Ventures bought in in 2015, shortly before another funding round highlighted the general consumer appeal of their product, with Hollywood movies stars Woody Harrelson and Owen Wilson becoming investors.
“Canva is arguably the best software business in the world right now and is an extraordinary success story, which will have massive implications for the technology ecosystem in Australia,” Bassat said on Wednesday.
“In start-ups, people often debate whether team or theme is more important. Canva is the case study of what occurs when a truly remarkable team coincides with a fantastic theme. They are still very early in their journey and no doubt there are many more chapters in the story.” Rick Baker, meanwhile, said he put Canva’s success down to a strong initial vision that had been brilliantly executed. He said unlike many tech companies that evolve and pivot their way to success, many of the slides in the current fundraising presentation are almost the same as those he first saw 10 years ago.
He describes Canva as the most product-obsessed company he has ever seen, noting that even at its current scale, most of the growth is still driven by new products such as talking presentations, team collaboration, videos and brand management.
“Incredibly, Canva’s growth has actually accelerated as its size has skyrocketed - the company will be growing faster at $1 billion of annualised revenue than at $100 million, which is simply unheard of,” Baker says.
“It’s one of those rare businesses where the proverbial flywheel of growth actually comes true. As Canva grows the product, more people use it, love it, and tell more people about it. “Canva is still relatively unknown in many regions and there is a huge growth opportunity ahead of them as they get the brand message out around the world.”
AirTree’s Petre says it was clear from the moment he met Perkins that she was an exceptional founder, with a clear strategy and product opportunity.
He says she and Obrecht had correctly spotted that Adobe was not focused on bringing its tools to a full range of users, and had gone on to build a company that demonstrated strong morals and values as well as unmatched growth.
“To be fair I think we are all surprised by how fast Canva has grown. Not surprised that they are successful, but the growth rates are simply amazing,” Petre says.
“There is no question in my mind that Canva will be the most successful tech company ever created out of Australia and there is no reason it can’t be worth multiples of its current valuation.” Perkins herself was keen to use the announcement of the company’s latest funding round to expand on that theme of company values, with the pledge that she and Obrecht would give away the “vast majority” of their wealth to good causes.
Perkins and Obrecht, who married earlier this year, continue to own 30 per cent of Canva, giving them a combined paper fortune of $16.5 billion.
She said her desire to share the spoils of her success were founded on a backpacking trip to India with Obrecht, where they met a man working day and night for just 30 rupees a day or less than a dollar, and feeling the injustice that she could earn so much more in a regular job back home.
“Billions upon billions of dollars is more than anyone needs in their entire lifetime by a long longshot,” Perkins said.
“We have this wildly optimistic belief that there is enough money, goodwill, and good intentions in the world to solve most of the world’s problems.“
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Swedish based BNPL “Buy now pay later”, direct competitor to Afterpay, but larger, more established player, particularly in Europe and North America. Note that CBA made a direct investment of $200m in Klarna in early 2020.
Over recent years, Klarna has typically generated a 30%+ rate of sales growth per annum, but this accelerated over 2020 to reach $1.2 billion, partly due to the effect of COVID-19 accelerating the online shift, but also due to the increasing importance of the US market, where Klarna’s more recent entry is delivering exceptional growth.
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